Talking Story and Other Stuff

I was talking real estate story with a friend and Cocoa Beach broker last week. He mentioned a listing appointment he'd gone on the previous week. Things went well and the owner told him she would call him back in December to list the unit. It was listed the next day with another agent. Imagine my surprise when I realized it was the same condo owner who had told me, the same day apparently, that she was going to try to sell the unit by owner but would call me to list it if that didn't work out. Very nice lady otherwise.

I received a notice from the Board of a condo where I own a unit indicating that a unit was contracted to sell and I was being given my ten day first right of refusal to match the contract. One problem: no contract or details of the contract were furnished. I asked the Board for a contract and/or details of the purchase contract so that I could consider whether I wanted to purchase the unit. The seller of the unit refused to provide a contract and the buyer began contacting Board member privately asking for their approval to move forward with the sale without the first right process. After threats of legal action, the seller notified the Board that the sale had been cancelled. I suspect that the contract was fraudulent. Most likely scenario is that the contract showed a lower selling price than the actual amount being given the seller. That would have lessened both the seller's capital gains tax and the buyer's property taxes. The problem here is that if I or another association member exercised our first right, all we would have had to pay for the unit is what was on the contract, not whatever under-the-table extra money had been agreed upon.

The online real estate landscape continues to evolve. Realtors are spending ever-increasing amounts to have their ads appear next to listings on Zillow and the like. An agent fresh out of real estate school can pony up the admission at any of these sites and instantly appear next to seasoned veterans with a "Cocoa Beach Expert" appellation. That placement pays off with buyer and seller inquiries that, hopefully,  turn into commission checks. With literally hundreds of agents competing for these placements the ad price continues to go up even as the effectiveness is diluted. I have no idea how this will play out. One possible scenario is agents bidding for placement, high bid gets the ad. Another possibility is allowing advertising agents to compete on commission in their ads. At least three different sites have already begun promising rebates to consumers who choose one of their "experts". It's not a stretch to think that Zillow could do an end run around all of that and affiliate with an existing broker in each state and underbid everyone for listings with a discount listing model. Once they own the bulk of the listings and the inquiries they could sell the buyer leads to starving agents for a healthy referral fee. Several of the franchises already do this. Make an inquiry on a property on one of the major franchise sites and, unknown to you, the perky agent who responds to your inquiry will have had to agree to pay as much as 40% of his commission check to the parent company BEFORE the split and franchise fees.

 In the recent past, the overwhelming majority of listings in Cocoa Beach and Cape Canaveral were with local offices. This morning over a third of all listings here are with offices in cities other than Cocoa Beach or Cape Canaveral. Several are in offices in other counties. Does it matter to a seller where her listing agent's office is? Maybe not, but, it may cost her a sale. The buyer who flew in for a day to look at his six favorite listings may not see your unit if the key didn't get returned to the lockbox and the spare is miles away at your agent's office. I would advise sellers to reduce as much friction as possible to selling their property. A distant listing office is unnecessary friction. Less friction can translate into a faster sale and/or higher selling price. Don't get me started on tenants or 24 hour notices to show.

Schools of big tarpon are cruising the beaches gorging on the mullet that are streaming southward on their annual migration. In addition to the usual fishing boats, anglers are hooking up from kayaks, stand-up paddleboards and occasionally from the beach. It's a great time for beach fishing. Snook and pompano are being caught from the beach as well and decent numbers of big flounder are being brought in at the Port. [The snook in the photo was 32.5" from the beach on an artificial lure a couple of years back] Rock shrimp are plentiful right now and are available in bulk at Seafood Atlantic and Wild Ocean at the Port and in cooked meals at many local restaurants. Grills has been offering a very reasonable and delicious plate of them. If you've never had rock shrimp, I encourage giving them a try. Somewhere between regular shrimp and lobster but tastier than either.

"It's always good to be underestimated."  ___Donald Trump

Winding Down

Man, it's been hot. Despite no crowds and cheap summer rates it just hasn't been worth risking heat stroke to play a few holes at the Cocoa Beach Country Club. On a more positive note, with school back in session the streets and beach are fairly deserted most of the time. Yen Yens is closed for their annual post-summer vacation. The mullet run has begun. Big breeder redfish are schooled up in the lagoon and river providing lifetime catch and release opportunities. Snook season is here and fishing from or just off the beach is as good as it gets. Giant tarpon are there for those crafty or lucky enough to hook up. We'll have several more weeks of it and hopefully a good swell or two from distant passing storms to take the edge off the wave-starved population of Cocoa Beach.

Not much has changed with the dried-up inventory situation. We are stuck in the same range with just 173 condos for sale this morning in Cocoa Beach and Cape Canaveral and 53 houses. Of those 226 residential properties for sale, eight are bank-owned and one is a short sale. Despite the low inventory 77 properties closed in August.

Single family home sales were robust with 18 closing in the month. Two open river Snug Harbor Cocoa Beach homes topped the price list at $592,000 and $630,000. At the other end of the scale, five houses closed for under $300,000, a couple in Harbor Heights Cape Canaveral and the other three in Cocoa Beach.

Activity at the upper end of the price range in condos was slow in August with only one condo selling for more than $400,000, a 5th floor fully furnished, direct ocean Palmas Majorca 3/2 that closed for $470,000 after almost a year on the market. Three quarters of all closed condo sales in August were under $250,000. The proportion of condo buyers financing their purchase continues to increase. Two out of five buyers used a mortgage to purchase their unit.

Days on market continues to drop with any decent unit priced close to fair value selling almost immediately. Of the 59 condo sales, 26 sold in less than a month and 11 of them the first week. It is more important than ever for prospective buyers to know what they want and to be prepared to move quickly when it sticks its snout out of the mix. Those planning to use a mortgage to purchase a condo need to talk to a knowledgeable local agent before compiling a list of units and then talk to a local lender to figure out what conditions might exist. There are buildings that no lender will touch and there are buildings that will only work with limited review mortgages. Sellers also need to understand the mortgage dynamics and qualifications of their buildings so they aren't tempted to accept an offer contingent upon a mortgage that will never happen. It doesn't matter how attractive the offer price is from that 10% down buyer if the building won't qualify. I'm here if you have questions. 

And then one day you find ten years have got behind you.

No one told you when to run. You missed the starting gun.
_________________Pink Floyd

Deal Killers

Congratulations. After months or years of searching and maybe a few unsuccessful offers you finally have the dream vacation home in Cocoa Beach under contract and are looking forward to parking a toothbrush and strolling to the beach in the backyard. It's practically a done deal. Nothing remains except closing. What could possibly go wrong?

Well, a few things. If one compares getting an accepted contract to filling a champagne glass, then the process of getting from accepted contract to the closing table would be running a 100 meter hurdle with a tray full of champagne glasses and arriving at the finish line with nothing spilled. Some common deal killers are:

• Appraisal
• Inspection
• Lender
• First Right of Refusal
• Title Issue
• Association Issue
• Property Manager
• Buyers Remorse or Circumstances

The surprise deal killer on the above list is the property manager. Condo sellers probably think their association's property manager will be helpful in the process of selling their unit. In most cases they are correct. In a few cases, they could not be more wrong. I briefly touched on the subject of bad property managers in the last post. I saw a property manager almost blow-up a condo closing this week with a mix of incompetence and sheer nastiness. When the estoppel letter from the manager arrived at the title company it showed a surprise balance owed the association of almost $3000. The sellers were current on condo fees and assessments and had no idea what the balance owed was about. When questioned, the manager came up with a history beginning with a missed monthly fee ten months ago that had compounded penalties and interest to the present amount. She was ultimately proved wrong but had the sellers not been able to produce the "missing" check deposited by her she would not have backed down on the erroneous balance owed and the condo unit would not have closed. This is the same property manager that had a young mortgage processor in tears on a separate deal a couple of years ago. For the record, this "worst property management company in the world" is not in Cocoa Beach or Cape Canaveral, but is nearby and manages condos in Cocoa Beach.

Quick quiz: How many short sale condos and townhomes are for sale right now in Cocoa Beach and Cape Canaveral?

Total inventory of units for sale in our two cities is 171. At the peak of the market in 2005, we closed that many units in a smoking six week period in May and June. Inventory at that time was just over 800 units and would increase to more than 1100 by mid 2006. There were zero short sales then. Short sales and foreclosures began showing up in 2007 and peaked in 2010 with almost half of all sales that year distressed, either short sale or foreclosure. Inventory and distressed percentage have both been in steady decline since and the answer to the quiz question is ZERO. There is not a single short sale condo or townhouse in Cocoa Beach or Cape Canaveral. There are seven bank-owned units for sale, only one of them oceanfront and none of them priced aggressively. Those looking for an oceanfront distressed "deal" have probably missed the boat. The current skew of heavy demand and little supply will likely continue to nudge prices higher though they are still well below the peak numbers of 2005 and 2006.

"The female, not the male, determines all the conditions of the animal family. Where the female can derive no benefit from association with the male, no such association takes place." _______Briffault's Law